Server Market Faces Disruption in 2014

“We are one of the first research firms to begin tracking ODMs or white box server vendors,” she said. “We are seeing impact on traditional server vendors, as the cloud vendors are switching from HP and IBM to Foxcomm, Quanta, and others. In terms of shares of their shipments, they have close to 10% and that number will continue to grow in the future.”

As much as competition from Taiwan has changed the landscape of the server market, it is competition from China in the cloud space that could bring about the industry transformation. “Google, Amazon, Facebook and Microsoft are the four big companies shipping to white box vendors. What will happen in the future -- and it’s really a safe prediction -- is that the next two mega-clouds will be China-based clouds,” she said.

How China affects US server companies
These emerging giants in the cloud space do not come from either the United States or Europe, but from China instead. They will most likely be purchasing servers from local vendors, Boujelbene said. “The US-based server vendors like IBM, HP, and Dell are not only facing competition from white box vendors like Quanta but competition from Chinese local vendors like Lenovo. It is most likely that Chinese cloud providers will buy from those local vendors.”

Among these Chinese companies, Loongson Technology Corp. Ltd. is sampling its first commercial microprocessor and plans to ship processors to up to 10 China server makers. This would allow China to build home-grown computers using its own microprocessor. The Godson 3B1500 is an eight-core, 32-nm server chip that began sampling last year.

Different server vendors have different strategies in the cloud. “Dell and HP have key accounts in the cloud space that help them gain share,” the analyst said, although that might not be the case every quarter because the cloud business is very lumpy. “On a quarterly basis, business may fluctuate,” she said.

Boujelbene described the second quarter of 2013 as a good quarter for HP, because HP had many cloud wins in the second quarter.

The analyst summed up: If you look at how the major server vendors will perform -- HP, IBM, and Dell -- there are two key trends or competitors: the white box server vendors and the local Chinese vendors. Why the local Chinese vendors? As I mentioned, we expect the growth to come from China and Chinese cloud providers buy locally. HP, IBM, and Dell say they are sometimes not allowed to participate in the contracts, because in the contracts it is mentioned that the vendors should be local.

Changing server market
The server market is changing. In addition to traditional rack and data servers, high-density servers are the new subcategory.

In addition to the two traditional form factors -- rack and datacenter servers -- Boujelbene said that a new subcategory of high density servers has been added to the mix. “You can look at rack and datacenter servers as one major category. Servers are sharing power,” she said. “They are sharing many components. You have the blade and the high-density server. I look at the blade as enterprise servers, servers used for enterprise, now moving to the cloud.“ The most efficient way to run such a system, she explained, is to have one big box with blade servers connected to storage.

Of the workloads that will move to the cloud, the majority will still work on a rack server, but high-density servers will definitely grow as a portion of servers working in the cloud, Boujelbene said. The workload-optimized server will allow for a mix and match of every server. “You can choose whatever you want to customize it to fit every type of form factor that you want. The rack is dominant, but high-density servers will grow as a portion of overall servers,” she said.

Yes you are quire right but the possibilities of emulation of x86 on Loongson 3 onward processor with 32 and 64 bit architecture variants ranging from quad to octal core started above mentioned thread in my mind.

At a first glance it seems strange considering Loongson Tech as in competition of Intel, but the demand of processors is of such a high volume that if Chinese govt change the import strategy all the Chinese companies will turn towards Loongson processors, And technically The Loongson 3 has the specific benefit of speeding up Intel x86 CPU emulation. So it can be easily replaced in x86 based devices.

1) OCP is promoting an alternative larger form factor that will support > node count

2) OCP also has aspirations to make CPUs interchangeable across server chassis, in this case you just replace the CPU module instead of the whole server sled. In this case it may disrupt Intel Tick/Tock dependency and creates additional server OEM challenges

3) It's all about higher density, lower cost, more tuned to high density configurations. Existing XEONs don't scale well given they typically must be augmented with so much support circuitry. I beleive the biggest configuartion is 4 XEONs per PCH. Competitive suppliers are architecting SOCs that can be more easily scaled.

Are MIPS designs really a viable means of competition in this market? It seems like a two horse race between ARM and Intel---or maybe its between all the different companies who are licensing ARM and Intel, but a MIPS-based Chinese company would be coming a bit out of left field.

It is very shocking news that Loongson Technology Corp. Ltd. is sampling its first commercial microprocessor, this might become a strong competitor for Inter and AMD, looking at the market share of China. This processor might an other flavour of ARM based designs.

Not discussed here is the OCP initiative which I believe to be the biggest upcoming disruption beyond today's ongoing aggregation at data centers. In addition, server count may be held in check while node count per server will soar higher.